United Airlines parent UAL said on Tuesday it reached an agreement in principle with a frequent flyer miles partner and a credit card processor that will increase the airline's liquidity by USD$1.2 billion.

UAL agreed with its Mileage Plus co-branded bank card partner, Chase Bank USA, and Paymentech, one of its credit card processors, to extend the term of their agreements.

United Airlines will receive USD$600 million from Chase related to the advance purchase of frequent flyer miles and the extension of the contract. United also expects the transaction will improve cash flow by USD$200 million in the next two years.

The level of reserves that United is required to maintain under its credit card processing agreement with Chase and Paymentech has been reduced, resulting in the release of USD$350 million in previously restricted cash, UAL said.